Cease and Desist Letters Need to Balance Effectiveness While Considering Consequences
Letters demanding that a company “cease and desist” what the sender of the letter deems an infringement of the sender’s intellectual property rights – whether patent, trademark or copyright – are communications primarily to achieve enforcement without a need to seek court intervention. Letters of this nature can be deceptively short and should neither be sent, nor result in a response, without a careful balancing of the rights involved, the competitive or business relationship between the parties, the result asked, also encompassing a tone of threat or compromise. Poorly thought out cease and desist letters have yielded unwanted results. Nestle wrote a cease and desist letter objecting to the use of “toll house” for chocolate chip cookies, without thinking through that the recipient of the letter was the Toll House Inn, where the recipe originated in the first place. The letter was unsuccessful, and indeed, when the threat was brought to court, the “mark” was initially declared generic. Nestle Co., Inc. v. Chester’s Market, Inc., 571 F. Supp. 763 (D. Conn. 1983). After some maneuvering, the parties settled, in order to keep the trade mark “toll house” alive. One can easily imagine that the settlement agreement is hardly the outcome that Nestle expected when they filed the law suit. Nestle Co., Inc. v. Chester’s Market, Inc., 756 F.2d 280. The hunter perhaps became the hunted?
Court procedures in the United States permit “declaratory judgment” actions in which the recipient of a threat can decide to not wait and file their own case in court. The accused party becomes the plaintiff in a declaratory judgment and the intellectual property owner who made the threat the defendant. Rules for finding a sufficient threat to be a “case and controversy” and the requirement that there be personal jurisdiction over a defendant leads to early disputes in declaratory judgment cases.
On May 12, 2021, in a patent infringement situation, the Court of Appeals for the Federal Circuit decided that a series of correspondence from a patent owner, non-practicing entity, to an accused infringer, seeking to license, was sufficiently detailed that the impact was felt in the location of the accused and the patent owner would not have the case transferred to their “home court.” Trimble Inc. v. PerDiemCo LLC No. 19-2164 (Fed. Cir. May 12, 2021). The extent of the correspondence is detailed and the decision depends in large part on its complete content. However, the Federal Circuit did clarify interpretation of an earlier case.
In the previous Red Wing Shoe Co. v. Hockerson-Halberstadt, Inc., 148 F.3d 1355 (Fed. Cir. 1998) case, the Federal Circuit found that three letters surrounding “cease and desist” communications were Constitutionally insufficient contacts for the sender of the letter to need to defend the Declaratory Judgment in the recipient – accused – plaintiff’s home court. There is a Constitutional calculus considering whether the place of the lawsuit is fair to the defending party based on contacts with the foreign jurisdiction and fairness. Three letters, even though the effect was “felt” in the plaintiff’s home court, were not enough contacts in that case. Importantly, the Trimble matter involved repeated communications and license negotiations such that the patent owner knew very well that they were negotiating to do business in California – where Trimble’s offices were located. Quantification is not the test, but the Court noted twenty-two communications. As pointed out, Red Wing only had three. The Court in the Trimble case pointed out that “An entity that repeatedly sends communications into a forum state “clearly has ‘fair warning that [its] activity may subject [it] to the jurisdiction of a foreign sovereign’” citing Quill Corp. v. North Dakota (504 U.S. 298, 308 (1992)).
Sending a cease and desist letter into jurisdictions outside the United States can lead to even more disastrous consequences such as threats (harassment) litigation in other common law jurisdictions.
Before sending a cease and desist letter and while negotiating, consider that if a deal is not forthcoming, there can be consequences, both ultimate, and procedural. Careful planning and evaluation can be beneficial in achieving an efficient and desirable result.